A Case on Restrictive Covenants

25th March 2013
A Case on Restrictive Covenants image

A Case on Restrictive Covenants

Employment Contracts often contain what are known as restrictive covenants.  Businesses seek to impose such restrictive covenants in order to try and prevent or limit a departing employee from doing such things as setting up in competition, working for a competitor, enticing away staff and soliciting customers and suppliers.

The restrictive covenant must be reasonable, in that it can only go so far as reasonably protecting a legitimate interest of the business and should not be used to stop departing members of staff from working.  As a result it is always important to get legal advice on such clauses, to try and ensure that they are reasonable or otherwise if they are found to be unreasonable then they will be void and have no effect whatsoever. 

An interesting case on restrictive covenants from the end of last year (2012) was Pat Systems –v- Neilly, which was determined by the High Court. 

Mr Neilly joined Pat Systems in 2000 as a junior salesman.  His original contract included a restrictive covenant stating that for twelve months after leaving the company he could not join a competitor.  In 2005 Mr Neilly was promoted to director of global accounts, a senior position.  Upon promotion he signed a letter that increased his salary and notice period.  The letter also included an acknowledgement that all other terms and conditions in his contract would remain unaltered.

In 2012 Mr Neilly resigned giving three months’ notice, and informed Pat Systems that he intended joining a company that Pat Systems regarded as a competitor. 

In response Pat Systems dismissed him without notice for a serious anticipatory breach of contract. 

The High Court considered that at the time Mr Neilly entered the contract in 2000 that it was quite clearly the case that the clause was void as it was unreasonable to impose a 12 month restriction on a junior salesman. 

However Pat Systems argued that the contract had been entered into in 2005 when Mr Neilly got promoted, upon the basis of his acknowledgement that all other terms remained unchanged. 

The High Court ruled that an acknowledgement was insufficient, and that Mr Neilly either needed to sign a new contract (including the covenant) or he needed to sign a fresh indication of acceptance of the existing covenant.

Daven Naghen, head of our Employment Team commented as follows:-

“This highlights the need for businesses to ensure that employees sign a new contract every time there is a change in role or a promotion.  Had Pat Systems done so in 2005 when Mr Neilly was promoted, then this probably would have prevented Mr Neilly from joining a competitor for 12 months as a 12 month restriction would probably have been deemed reasonable for the position he had acquired in 2005.”

If you need advice on restrictive covenants or any issues in respect of drafting contracts then please contact Daven Naghen on 01775 722261 or email daven.naghen@maplessolicitors.com or write to Dav at 23 New Road, Spalding, Lincolnshire PE11 1DH.


Who Will You Be Entrusting With Your Conveyancing? image

Who Will You Be Entrusting With Your Conveyancing?

WHO WILL YOU BE ENTRUSTING WITH YOUR CONVEYANCING WORK?  THE CHOICE IS YOURS!

Are the selling agents or perhaps the mortgage broker pushing or trying to persuade you to use a particular conveyancing firm? If so, we would strongly recommend that you ask the following pertinent questions so that, armed with all relevant facts, you are better able to make a reasoned decision:-

Why?

Are the agents receiving a kickback or referral payment from the firm concerned? Using a firm in cahoots with an estate agency inevitably leads to a potential conflict of interest. Will such firm be working in your best interests or simply those of the introducer? Here at Maples we pride ourselves on being completely independent and we consider the idea of a referral fee both abhorrent and unethical. We much prefer to obtain our work based on past performance and recommendation.

How Much?

Do not be misled by a seemingly attractive basic figure initially quoted but be sure to enquire about and read the small print for add ons for so called “extras” (such as mortgage costs, preparation of a stamp duty land tax return, telegraphic transfer fees and the like) which suddenly spring up at a later date and only become apparent in the firm’s final statement. Ensure that you are comparing like for like. Here at Maples, we give you a complete and all inclusive rundown of our professional charges and all disbursements at the outset, with no hidden extras.

Where?

Is the firm local or, as is more likely, based in a completely different part of the country? If the latter, then the transaction will, without a doubt, be dealt with by post, phone or email and lack any personal contact. Here at Maples we are fully accessible, like to meet our clients to discuss and advise upon the transaction face to face and share with you the benefit of our wealth of local knowledge and experience.

Who?

Will you actually be aware as to who will be dealing with the matter for you or will you simply be a reference or matter number at the end of a phone in a firm dealing with volume conveyancing? Here at Maples, you will be assigned to your own experienced and dedicated conveyancer who will be responsible for and deal with the transaction for you from beginning to end, with a high level of personal service throughout.

Making a hasty and bad appointment could seriously prejudice or delay your transaction and cost you dearly. Getting honest answers to these four simple questions at the outset could make all the difference.

To discuss any Conveyancing matters please contact either Claire Smith or Anita Zaborniak of our Conveyancing Team or telephone the office 01775 722261.

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Testimonials

Gemma Mayer LLB

"I would highly recommend Maples Solicitors, especially Gemma Mayer, for any conveyancing work. The level of support and professionalism was excellent at all times. I also felt if I needed to ask or clarify anything that it was not an issue. Buying and selling a house is stressful enough, but Gemma helped me through it step by step."

Anita Toal LLB BA

"I think you are brilliant. You can use my comments above. You are efficient, friendly and quite clearly very good at what you do. Mainly you don’t leave people hanging around too long for." "So easy to talk to her and she understood what I wanted. She put me at ease and I cant thank her enough"

Daven Naghen LLB

"I felt the service I got from Maples was excellent and was very honest all through the process. I would recommend Maples as a first class Solicitors group"

Faye Blair LLB

Faye was excellent, sensitive and acted very well to the time constraints we faced. Great service and dealt with compassion at such sad times made the process less painful very professional.

Jamie Dobbs ACILEx

Over the last forty years I have cause to deal with many law firms both in a personal and professional capacity, including some ‘top’ London Companies. In all of those dealings I have never found anyone as proactive and so willing to offer help and advice as Jamie Dobbs. During the last two years Jamie guided my parents through the completion of Lasting Powers of Attorney. Helped myself with the use of the LPA and recently dealing with Probate and Estate Administration following their death.

Mike Pepper MA

This is the second time we have used Mike Pepper at Maples Solicitors in the sale of our house. We cannot praise Mike enough for the highly efficient and professional service that he has provided us with. He is by far the best solicitor we have ever worked with, and the service that he has provided us with has gone far and beyond anything we have ever experienced. We have found the whole process to be a very relaxing experience.

Claire Smith FCILEx

Claire Smith has been amazing in every way. I highly recommend her and I am so grateful for all her help. She’s professional on all levels, reliable, extremely organised and I will be recommending her to everyone. I’m very lucky to have had her representing me and I can’t thank her enough. She is an asset to Maples. Thanks so much Claire!

Anita Zaborniak

We found it a pleasure to deal with Anita Zaborniak, she was most helpful and informative and kept us up to date with the progress of the purchase of our new home. If we were to move again we wouldn’t hesitate to use Maples again.